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In Year 4, Jordan Manufacturing discovered that $4,500,000 of depreciation expense was not recorded...

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Accounting

In Year 4, Jordan Manufacturing discovered that $4,500,000 of depreciation expense was not
recorded in previous years.
Also, at the beginning of Year 4, the Company decided to change inventory methods from LIFO
to FIFO. The following information details the pretax income under LIFO and FIFO for Years 1-3:
PRETAX INCOME UNDER
Year 1
Year 2
Year 3
TOTAL
ADDITIONAL INFORMATION:
The Company's tax rate is 40% for all years.
The reported Retained Earnings balance at the end of Year 3 was $6,300,000
(Pretax Income of $10.5 million x60%
Net income for Year 4 was $4,800,000.
REQUIRED:
1 Calculate the required adjustment for the depreciation error and indicate how this
correction should be presented in the financial statements.
2 Calculate the cumulative adjustment for the change in principle and indicate how this
adjustment should be reported in the financial statements.
3 Prepare the statement of retained earnings for Year 4, assuming the following:
the CO is presenting financial statements for Year 4 only.
-no dividends were declared in Years 1-3
-$400,000 of cash dividends were declared on Common Stock in Year 4
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